A Quick Guide To Private Club Accounting
by Jacob Statler
Private club accounting isn’t something you talk about much when you’re chatting about your club’s operation, is it?
You talk about the spectacular golf course, the world-class cuisine, the state-of-the-art amenities, and the unparalleled customer service.
No one wants to hear about your club’s accounting tasks, guidelines, or processes. But yet, without them, there’s no flourishing club.
Private club accounting is in a category all its own and deserves R-E-S-P-E-C-T.
It’s challenging and requires attention to detail and ultra-accuracy.
This post will cover all the finer points of country club accounting. We’ll address:
- How is country club accounting unique?
- 5 Private club accounting areas
- Financial statement audits and reviews for private club accounting
- 4 AP automation benefits for your country club
- Tax Planning & Compliance for clubs
- How to choose AP automation software
Colorado’s Club Ravenna used Plate IQ’s AP automation to shave time spent on invoice processing from an entire day to just 90 minutes per week. As a result, they’ve streamlined their invoice processing system, which spans multiple departments and includes 250 invoices a month.
How is country club accounting unique?
Country club operations are unique, and so is their accounting. Country clubs have multiple departments with a wide array of expenditures. As a result, staying on top of all areas of private club accounting is an enormous responsibility.
You’ve got to have the ability to account for different revenue streams, amenities, and special-purpose funds and be ready to provide accurate financial data when the board comes callin’.
Let’s hone in on country club accounting’s uniqueness:
- Country club boards are heavily involved in financial expense decisions — many invoice payments require a board member to sign.
- Approval workflows tend to require stakeholders who aren’t always on-site. For example, board members or general managers might be in another department or out on the green when you need an invoice approval.
- Country club CFOs spend A LOT of time on reporting and are always on the lookout for ways to boost reporting efficiency.
- Country club accounts payables tend to be swamped in paperwork.
- Capital improvements need cost justification to your members before you begin spending their club fees.
- Country club boards regularly request financial metrics to help them make the wisest operational and spending decisions for the future.
According to a report on private club trends, for every dollar of operating revenue received by a club, almost $0.61 comes from dues, so keeping track of expenses to know where your member dues are being spent is critical.
The power of the accounting and auditing function in a private club rests in its ability to present a complete and accurate financial picture of club operations and confirm compliance with all tax-exempt organization requirements.
Country club accounting covers food & beverage, the golf course, tennis, pool, and several other areas. In most cases, each country club department has its own P&L, staff, and vendors, making private club accounting super complex.
5 Country club accounting branches
There are different branches of accounting used within a country club. Each has a specific purpose, and they all work together to provide a smooth, efficient, compliant, and streamlined accounting system.
- Financial accounting — Focuses on your country club’s revenue, expenses, assets, and liabilities. Financial accounting’s purpose is to stick to external regulations — its not used by your board in decision making. This area of accounting is historical — in human speak, it deals with your club’s past events by organizing past financial transactions into reports.
- Cost accounting — Deals with the recording, classification, allocation of current and proposed costs in each club department. Cost accounting aims to examine, summarize, and understand how each department spent money efficiently and on controlling club operations.
- Managerial accounting — Deals with proposed events and upcoming expenditures. This branch provides performance reports, with the primary purpose to provide in-depth financial info to aid your board in managerial decisions concerning planning and budgeting. A country club board relies heavily on this branch of accounting to make informed decisions on club operations and expenditures.
- Tax accounting — This branch handles tax prep and filing of tax forms with government agencies. One primary responsibility of this branch is to double-check that your club is compliant with all IRS regulations — under IRS code 501c7, country clubs can be recognized as tax-exempt organizations. In other words, to hang on to your tax-exempt status, serving your club members must be your top priority. The IRS requires proof that your club is doing this.
Your club’s tax-exempt status is based on your membership activity. Your club can receive up to 35% of its gross receipts, including investment income, from sources outside of membership without losing its exempt status. No more than 15% of gross receipts can come from nonmember use of club facilities and services.
- Auditing — An external 3rd party CPA handles this. Their job is to review and evaluate all documents, records, and control systems to confirm accuracy and consistency. Part of the auditing process for your club includes reviewing your country club’s articles of organization, bylaws, and any policy statements. Your auditor will confirm that your club is organized for non-profit pleasure and recreation AND all club activities are within the scope of IRS Section 501(c) (7).
Audits sound scary, but they’re incredibly helpful in efficiently managing your club’s operations and confirming your club is IRS compliant.
**AP automation can enhance all accounting branches, but it’ll significantly improve cost accounting and auditing because it streamlines the invoice processing workflow and tracks and maps all line items to make audits a breeze.
5 Financial statement audits and reviews for private club accounting
The function of accounting is more than record-keeping and bill paying. All that financial data enables you to put together reports that tell the story of your club’s operations. That’s some serious power.
There are specific statement audits and reviews that should be done regularly to keep an eye on your financial health. These audits and reviews are valuable info to present to your board.
1. Accounting cycle control studies
These studies include data reports on inventory, revenue, and payroll for 1 complete accounting cycle. These are critical studies that should be prepared monthly to better understand and control your club’s operation and management decisions.
These studies will be regularly presented to your board as an overall financial picture of your club’s accounting cycle including all financial transactions.
2. Accounting policy and procedure manuals
Your club MUST have up-to-date policies and procedures. And those change periodically as you improve operations. So, for example, if you use manual AP processing and switch to AP automation (as you absolutely should, ) your country club will have to change your policies and procedure manual to adapt to your new AP system.
3. Financial reporting analysis best practices
Timely, continuous, and consistent financial reporting is the key to stellar financial controls. Establishing a regular financial reporting schedule keeps you on top of each department’s operations and provides a birds-eye view of your club’s financial health.
As you routinely analyze your club’s financial reports, you’ll be able to spot problem areas quickly and make adjustments. (#accountinghero)
4. KPIs and benchmarking ratios
Key Performance Indicators (KPI) and benchmarking reports are critical to your club’s operation and management. A KPI measures progress toward your club’s goals. A benchmark report allows you to see how your club’s performance compares to similar clubs.
Both help club management and your board plan ahead for future success by allowing them to get a read on your club’s performance, costs, and operations.
5. Revenue Recognition Considerations
Revenue recognition is exactly what it sounds like — recognizing your club’s streams of revenue in a financial report. Be aware, auditors focus heavily on accuracy when it comes to revenue recognition in financial statements. There are 4 different criteria that must be met before revenue can be recognized:
- Proof of an agreement (service or product in exchange for money) must exist.
- Delivery must’ve already occurred or services already rendered.
- The seller’s price to the buyer must be fixed.
- The ability to collect payment should be reasonably assured.
4 AP automation benefits for your country club
Top-level country clubs leverage invoice processing automation to boost savings and spend management, improve workflow, increase productivity and efficiency, and ensure continuity throughout club operation.
Need another reason to switch to automated AP? Those who use accounts payable automation software save an average of an hour a day.
Here are 4 of the many benefits of AP automation:
- Stay on top of club financials — AP automation streamlines everything about your invoice processing, making it easy to run accurate reports at the click of a button.
- Manage food and beverage costs & inventory — With all invoices digitized and properly coded, managing food and beverage costs & inventory is a simple process that takes very little time each week.
- Manage golf course expenses & maintenance — Automation simplifies the entire process of managing your golf course and all its expenses. Timely, accurate info is available whenever you need it.
- Expense Management — Tracking and controlling your club expenses is essential for your club’s success. AP automation allows for real-time expense tracking so you can efficiently manage your expenses without lag time.
Tax Planning & Compliance for clubs
Tax strategy for private clubs involves various provisions and requirements related to maintaining tax-exempt status, specialty tax credits, and deductions available to those clubs who search and plan for them.
Beyond basic annual tax compliance, your club must have ongoing tax planning and strategy covering the following areas:
- Federal, state, and local tax planning and prep
- Deferred tax on reinvested property
- Capital gains tax consulting
- Specialty taxes, such as entertainment, sales, and use
- Form 990 assistance (provides the public with financial info about your nonprofit club)
- Representation for IRS and other taxing authorities (it’s wise to use a contracted company with certified accountants).
How to choose AP automation software
When it comes to private club accounting, the right tools make the job much easier. AP automation can streamline your entire AP department. In fact, using digital payables platforms can lower processing costs by 81% and speed up processing cycles by 73%.
Choosing the right software is crucial.
The Plate IQ team can help evaluate your club’s needs and how to best integrate AP automation with your existing technology interface. The team can also analyze how well your club is utilizing its existing software.
Plate IQ has assisted numerous restaurants, hotels, and country clubs in streamlining their technology by providing independent reviews and specialized guidance.
When you begin the search for an AP automation program, use this checklist of “must-haves” to gauge the best option:
- Invoice Automation — The ability to digitize invoices in line-item detail will lighten your workload and increase efficiency and accuracy.
- VendorPay — Electronic bill pay enables you to pay vendors right within your AP automation system. You should be able to pay with ACH, check, or a virtual card. The Plate IQ Card lets you earn up to 1% cash back while simply paying your bills.
- Expense Management — Real-time expense tracking and control are the ultimate in expense management. Using virtual cards for expenses lets you keep a close eye on your expenses and avoid unauthorized overspending.
- Document Storage — Your new program must provide ample, secure digital document storage. Access an invoice with the click of a button from anywhere to keep your workflow running like a smooth operator.
- Automatic line mapping to GL Code — “Automatic” is the keyword here. You should be able to map items to your chart of accounts once, and after that, your AP software should do that for you.
Country club accounting doesn’t have to be daunting
Country club accounting is unique and complex. But it doesn’t have to be daunting. Regular reporting, consistent expense management, and staying on top of financial reviews can simplify your club’s accounting.
AP automation can revolutionize your invoice processing, expense management, and financial reporting.
Plate IQ will help streamline your AP process and shave hours off your accounting tasks. They’re here to help bring your club’s accounting into the digital age.
Jacob Statler writes about the unique challenges of hospitality AP automation for Plate IQ.
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